THE pound surged yesterday after a sharp rise in inflation increased the pressure on the Bank of England to raise interest rates this year.

Sterling is trading at a near-six-year high against the dollar after climbing 0.3 per cent to $1.715 and is at its highest against the euro for nearly two years after a 0.7 per cent rise to €1.263. The latest rise was triggered by a 1.9 per cent acceleration in consumer prices in June from 1.5 per cent in May. Economists had forecast a 1.6 per cent rise.

The news will fuel expectations that the Bank will start raising interest rates sooner rather than later, with November looking most likely for the first hike

Markit chief economist Chris Williamson

Half the rise in the 12-month inflation rate came from clothing and footwear which analysts put down to the later start to the summer sales this year. Food price inflation also picked up in June. Inflation remains below the Bank’s 2 per cent target, enabling policymakers to hold off from hiking borrowing costs.

But Markit chief economist Chris Williamson said: “The news will fuel expectations that the Bank will start raising interest rates sooner rather than later, with November looking most likely for the first hike. With inflation almost hitting the Bank’s 2 per cent target, the housing market booming, the economy growing strongly and unemployment plummeting the case for higher interest rates is building.”